<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________________ to ______________________
Commission file number: 0-14397
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-3
- - - - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 75-1991528
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Seaport Plaza, New York, NY 10292-0116
- - - - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 214-1016
N/A
- - - - --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _CK_ No __
<PAGE>
<PAGE>
Part 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-3
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
March 31, September 30,
1995 1994
<S> <C> <C>
- - - - ----------------------------------------------------------------------------------------------------
ASSETS
Investment in property:
Land $ 8,451,772 $ 8,451,772
Buildings and improvements 12,309,754 12,277,288
Furniture, fixtures and equipment 341,134 330,371
Less: Accumulated depreciation (4,436,149 ) (4,174,673)
Allowance for loss on impairment of assets (2,745,000 ) (2,745,000)
------------ -------------
Net investment in property 13,921,511 14,139,758
Cash and cash equivalents 666,892 708,909
Other assets 50,327 55,097
------------ -------------
Total assets $14,638,730 $14,903,764
------------ -------------
------------ -------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Note payable $ 638,000 $ 638,000
Accounts payable and accrued expenses 172,787 279,503
Accrued real estate taxes 73,149 144,899
Deposits due to tenants 69,645 79,924
Due to affiliates 59,185 40,285
Unearned rental income 29,466 25,485
------------ -------------
Total liabilities 1,042,232 1,208,096
------------ -------------
Contingencies
Partners' capital
Limited partners (53,855 limited and equivalent units issued and
outstanding) 13,391,682 13,501,222
General partners 204,816 194,446
------------ -------------
Total partners' capital 13,596,498 13,695,668
------------ -------------
Total liabilities and partners' capital $14,638,730 $14,903,764
------------ -------------
------------ -------------
- - - - ----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
2
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PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-3
(a limited partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
March 31, March 31,
--------------------- ---------------------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
- - - - ----------------------------------------------------------------------------------------------------
REVENUES
Rental income $959,804 $940,647 $482,464 $484,758
Interest 8,266 5,629 4,261 2,667
Other 7,129 11,318 4,188 1,380
-------- -------- -------- --------
975,199 957,594 490,913 488,805
-------- -------- -------- --------
EXPENSES
Property operating 350,850 334,767 175,596 175,585
Depreciation 261,476 254,044 131,074 127,400
General and administrative 116,394 139,218 58,075 83,415
Real estate taxes 102,693 101,751 55,143 55,887
Interest 24,539 17,916 11,418 9,075
-------- -------- -------- --------
855,952 847,696 431,306 451,362
-------- -------- -------- --------
Net income $119,247 $109,898 $ 59,607 $ 37,443
-------- -------- -------- --------
-------- -------- -------- --------
ALLOCATION OF NET INCOME
Limited partners $ 91,404 $ 83,323 $ 45,663 $ 25,530
-------- -------- -------- --------
-------- -------- -------- --------
General partners $ 27,843 $ 26,575 $ 13,944 $ 11,913
-------- -------- -------- --------
-------- -------- -------- --------
Net income per limited partnership unit $ 1.71 $ 1.55 $ .85 $ .48
-------- -------- -------- --------
-------- -------- -------- --------
- - - - ----------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
LIMITED GENERAL
PARTNERS PARTNERS TOTAL
<S> <C> <C> <C>
- - - - ---------------------------------------------------------------------------------------------------
Partners' capital--September 30, 1994 $13,501,222 $194,446 $13,695,668
Net income 91,404 27,843 119,247
Distributions (200,944) (17,473) (218,417)
----------- -------- -----------
Partners' capital--March 31, 1995 $13,391,682 $204,816 $13,596,498
----------- -------- -----------
----------- -------- -----------
- - - - ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
3
<PAGE>
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-3
(a limited partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
-----------------------
1995 1994
<S> <C> <C>
- - - - ---------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Rental income and deposits received $ 958,276 $ 946,327
Interest received 8,266 5,629
Other income received 7,129 11,318
Property operating expenses paid (441,914) (377,019)
Real estate taxes paid (174,443) (169,469)
General and administrative expenses paid (113,146) (135,830)
Interest paid (24,539) (20,076)
--------- ---------
Net cash provided by operating activities 219,629 260,880
CASH FLOWS FROM INVESTING ACTIVITIES
Property improvements (43,229) (34,970)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions paid to partners (218,417) (394,609)
--------- ---------
Net decrease in cash and cash equivalents (42,017) (168,699)
Cash and cash equivalents at beginning of period 708,909 666,220
--------- ---------
Cash and cash equivalents at end of period $ 666,892 $ 497,521
--------- ---------
--------- ---------
- - - - ---------------------------------------------------------------------------------------------------
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income $ 119,247 $ 109,898
--------- ---------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 261,476 254,044
Changes in:
Other assets 4,770 (11,474)
Accounts payable and accrued expenses (106,716) (90,290)
Accrued real estate taxes (71,750) (67,718)
Due to affiliates 18,900 49,266
Deposits due to tenants (10,279) 23,068
Unearned rental income 3,981 (5,914)
Other liabilities -- --
--------- ---------
Total adjustments 100,382 150,982
--------- ---------
Net cash provided by operating activities $ 219,629 $ 260,880
--------- ---------
--------- ---------
- - - - ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
4
<PAGE>
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-3
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
(Unaudited)
A. General
These financial statements have been prepared without audit. In the opinion
of Prudential-Bache Properties, Inc. (``Managing General Partner'') (``PBP''),
the financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position of
Prudential-Bache/Watson & Taylor, Ltd.-3 (the ``Partnership'') as of March 31,
1995, the results of its operations for the six and three months ended March 31,
1995 and 1994, and its cash flows for the six months ended March 31, 1995 and
1994. However, the operating results for the interim periods may not be
indicative of the results expected for the full year.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended September 30, 1994.
Certain balances for the prior period have been reclassified to conform with
the current financial statement presentation.
B. Related Parties
PBP and its affiliates perform services for the Partnership which include,
but are not limited to: accounting and financial management, transfer and
assignment functions, property management (including direct management of the
Partnership's unimproved properties), investor communications, printing and
other administrative services. PBP and its affiliates receive reimbursement for
costs incurred in connection with these services, the amount of which is limited
by the provisions of the Partnership Agreement. The costs and expenses incurred
on behalf of the Partnership which are reimbursable to PBP and its affiliates
for the six and three months ended March 31, 1995 and 1994 were approximately
$54,000 and $47,000 and $34,000 and $23,000, respectively.
Affiliates of Messrs. Watson and Taylor, the individual General Partners,
also perform certain administrative and monitoring functions on behalf of the
Partnership. The Partnership recorded $1,250 for the reimbursement of these
services for the three months ended March 31, 1995. The Partnership recorded
$27,250 relating to the reimbursement for these services for the period from
November 1988 through March 1994 during the three months ended March 31, 1994.
PBP and the individual General Partners of the Partnership own 270, 135 and
135 equivalent limited partnership units, respectively. PBP receives funds from
the Partnership, such as General Partner distributions and reimbursement of
expenses, but has waived all of its rights resulting from its ownership of
equivalent limited partnership units.
Prudential Securities Incorporated (``PSI''), an affiliate of PBP, owns 253
limited partnership units at March 31, 1995.
C. Contingencies
By order of the Judicial Panel on Multidistrict Litigation dated April 14,
1994, a number of purported class actions then pending in various federal
district courts were transferred to a single judge of the United States District
Court for the Southern District of New York and consolidated for pretrial
proceedings under the caption In re Prudential Securities Incorporated Limited
Partnerships Litigation (MDL Docket 1005). On June 8, 1994 plaintiffs in the
transferred cases filed a complaint that consolidated the previously filed
complaints and named as defendants, among others, PSI, certain of its present
and former employees and PBP. The Partnership is not named a defendant in the
consolidated complaint, but the name of the Partnership is listed as being among
the limited partnerships at issue in the case. The consolidated complaint
alleges violations of the federal and New Jersey Racketeer Influenced and
Corrupt Organizations Act (``RICO'') statutes, fraud, negligent
misrepresentation, breach of fiduciary duties, breach of third-party beneficiary
5
<PAGE>
contracts, breach of implied covenants in connection with the marketing and
sales of limited partnership interests. Plaintiffs request relief in the nature
of rescission of the purchase of securities and recovery of all consideration
and expenses in connection therewith, as well as compensation for lost use of
money invested less cash distributions; compensatory damages; consequential
damages; treble damages for defendants' RICO violations (both federal and New
Jersey); general damages for all injuries resulting from negligence, fraud,
breaches of contract, and breaches of duty in an amount to be determined at
trial; disgorgement and restitution of all earnings, profits, benefits and
compensation received by defendants as a result of their unlawful acts; costs
and disbursements of the action; reasonable attorneys' fees; and such other and
further relief as the court deems just and proper.
PSI and PBP, along with various other defendants, filed a motion to dismiss
the consolidated complaint on December 20, 1994. That motion is pending.
D. Subsequent Event
In May 1995, distributions of approximately $67,000 and $6,000 were paid to
the limited partners and the General Partners, respectively, for the quarter
ended March 31, 1995.
6
<PAGE>
PRUDENTIAL-BACHE/WATSON & TAYLOR, LTD.-3
(a limited partnership)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Unaudited)
Liquidity and Capital Resources
The Partnership owns and operates five office/warehouse facilities, one
office facility, one mini-storage facility, and two parcels of undeveloped land.
During the six months ended March 31, 1995, the Partnership's cash and cash
equivalents decreased by approximately $42,000 to $667,000 primarily due to
capital expenditures and the timing of accrued expense payments.
Distributions of approximately $201,000 and $17,000 were paid to the limited
partners and General Partners, respectively, during the six months ended March
31, 1995. The distributions were funded by property operations. The Partnership
retained a portion of the cash from property operations in anticipation of
budgeted 1995 capital expenditures.
The Partnership's ability to make future distributions to the partners and
the amount of distributions that may be made will be affected not only by the
amount of cash generated by the Partnership from the operations of its
properties, but also by the amount expended for capital improvements and the
amount set aside for anticipated capital improvements. Capital improvements are
currently budgeted at approximately $102,000 for the remainder of calendar year
1995.
Results of Operations
Occupancies at March 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
March 31,
----------------
1995 1994
<S> <C> <C>
- - - - ------------------------------------------------------------
Barrow Road 89.7% 90.9%
La Prada 94.3 98.6
Tulsa Peoria 85.9 90.1
Westheimer 74.4 81.2
Eastgate 92.9 92.9
Quail Valley 100.0 97.1
Mt. Holly 93.8 85.0
</TABLE>
(Occupancies are calculated by dividing occupied units by available units.)
Net income increased by approximately $9,000 and $22,000 for the six and
three months ended March 31, 1995, respectively, as compared to the
corresponding periods in 1994 for the reasons discussed below.
Rental income increased by approximately $19,000 but decreased by
approximately $2,000 for the six and three months ended March 31, 1995,
respectively, as compared to the same periods in fiscal 1994. Rental income at
the Eastgate, Quail Valley, and Mt. Holly properties has improved due to
increased average occupancies. Rental income at La Prada and Westheimer
decreased due to lower average occupancies in addition to lower effective rental
rates at La Prada. Rental income at Barrow Road and Tulsa Peoria remained
stable.
Other income decreased by approximately $4,000 but increased by approximately
$3,000 for the six and three months ended March 31, 1995, respectively, due to
the timing of billboard revenue receipts.
Property operating expenses increased by approximately $16,000 for the six
months ended March 31, 1995 as compared to the same period in the prior year
primarily due to an increase in property payroll costs at Westheimer, Tulsa
Peoria and Quail Valley. The increase was partially offset by a decrease in
repairs and maintenance due to budgeted projects that did not begin until after
March 31, 1995, and a decrease in utilities expense at La Prada, Westheimer and
Quail Valley during the quarter ended March 31, 1995.
General and administrative expenses decreased by approximately $23,000 and
$25,000 for the six and three months ended March 31, 1995 as compared to the
same periods in 1994 primarily due to the accrual
7
<PAGE>
of prior periods' general, administrative and monitoring expense reimbursements
in 1994. The decreases were partially offset by higher office expenses at the
properties.
Interest expense on the Partnership's note payable is calculated as a
percentage of net cash flow from the three properties (Eastgate, Quail Valley
and Mt. Holly) which collateralize the note. Interest expense increased by
approximately $7,000 and $2,000 for the six and three months ended March 31,
1995 as compared to the same periods in 1994 as a result of increased cash flows
from operations at the three properties.
8
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings--This information is incorporated by reference to Note
C to the financial statements filed herewith in Item 1 of Part I of the
Registrant's Quarterly Report.
Item 2. Changes in Securities--None
Item 3. Defaults Upon Senior Securities--None
Item 4. Submission of Matters to a Vote of Security Holders--None
Item 5. Other Information--None
Item 6. (a) Exhibits
Description:
3.01 Amended and Restated Certificate and Agreement of Limited
Partnership (filed as an exhibit to Registration Statement on Form
S-11 (No. 2-94976) and incorporated herein by reference)
3.02 Amendment to the Amended and Restated Certificate and
Agreement of Limited Partnership (filed as an exhibit to
Registrant's Form 10-K for the year ended September 30, 1989
and incorporated herein by reference)
4.01 Certificate of Limited Partnership Interest (filed as an
exhibit to Registration Statement on Form
S-11 (No. 2-94976) and incorporated herein by reference)
(b) Reports on Form 8-K--None
9
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Prudential-Bache/Watson & Taylor, Ltd.-3
By: Prudential-Bache Properties, Inc.
A Delaware corporation,
Managing General Partner
By: /s/ Robert J. Alexander Date: May 15, 1995
----------------------------------------
Robert J. Alexander
Vice President
Chief Accounting Officer for the
Registrant
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for Prudential-Bache Watson & Taylor Ltd 3
and is qualified in its entirety by reference
to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000759726
<NAME> Prudential-Bache Watson & Taylor Ltd 3
<MULTIPLIER> 1
<FISCAL-YEAR-END> Sep-30-1995
<PERIOD-START> Oct-1-1994
<PERIOD-END> Mar-31-1995
<PERIOD-TYPE> 6-Mos
<CASH> 666,892
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 50,327
<PP&E> 18,357,660
<DEPRECIATION> 4,436,149
<TOTAL-ASSETS> 14,638,730
<CURRENT-LIABILITIES> 404,232
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 14,638,730
<SALES> 0
<TOTAL-REVENUES> 975,199
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 831,413
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,539
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 119,247
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
